ASK THE EXPERTS

ASK THE EXPERTS: What to do with the prevailing wage?

Ask a construction worker: It’s a must.

By Justin Sweitzer

PREVAILING WAGE laws may not get the attention that minimum wage debates do, but state and federal laws mandating certain wages and benefits for those working on public construction projects have been a point of contention between lawmakers, advocates and workers for years.

Both the state Prevailing Wage Act and the federal Davis-Bacon Act, passed in 1931, require construction workers to be paid a base wage – plus benefits – for any construction project that requires taxpayer dollars to complete. Proponents of the laws say the mandates result in higher wages and better standards of living, while critics argue that such requirements artificially inflate the cost of construction projects, leaving taxpayers to pick up the tab.

City & State reached out to the following experts about the benefits and drawbacks of prevailing wage requirements: Frank Gamrat, executive director of the Allegheny Institute for Public Policy; Ryan Boyer, business manager of the Philadelphia Building & Construction Trades Council; Republican state Sen. Kristin Phillips-Hill; and Democratic state Sen. Christine Tartaglione, minority chair of the Senate Labor & Industry Committee. The following responses have been edited for length and clarity.

How does the state’s Prevailing Wage Act affect workers and the economy as a whole?

Frank Gamrat: For the economy as a whole, the prevailing wage law is more of a signal to employers who are looking to locate or expand. It signals that the state is not afraid to meddle in the affairs of private businesses by issuing mandates that will likely raise the cost of doing business. It makes Pennsylvania very uncompetitive when compared to states that don’t have prevailing

Phillips-Hill represents the 28th Senate District in York County.

Pennsylvania’s prevailing wage law was enacted in 1961 to protect construction workers from out-of-state competition.

BGWALKER/GETTYIMAGES; SENATE REPUBLICAN COMMUNICATIONS OFFICE wage laws or right-to-work laws. As a result, Pennsylvania’s private job growth continues to lag the national average and that of states without such mandates.

Ryan Boyer: I think the state’s prevailing wage is a great law designed to protect area wages and standards to make sure that we don’t have unscrupulous contractors coming from other low-wage places, such as the South and the Sun Belt states. It rolled out area wages and standards. It gets workers more spending power, so it makes the economy more resilient. Here’s a fun fact about the prevailing wage in Pennsylvania: It was actually the small business contractors that wanted it because they wanted a fair shot at winning work. When it was first enacted, it was to fight back out-oftown competition, mainly from the south and certain parts of Appalachia, so that we could protect the area wages and standards so the workers could actually have decent pay. I think that today, with the haves and have-nots, it’s actually more important.

Kristin Phillips-Hill: Pennsylvania has had a prevailing wage requirement in place for over 60 years. Our state and our economy have drastically evolved over the last six decades, but this requirement still remains in place. In York County, for example, an out-of-state contractor is working on a major interchange project. The delay in the project has now exceeded the original project completion timeline. The project is now three years late. It’s unacceptable. If the goal of the original law was to protect Pennsylvanians from outof-state contractors, it has clearly failed the people of York County.

Christine Tartaglione: It contributes to the creation of high-paying, family-sustaining jobs, both union and non-union. It also allows for both non-union and union contractors and employers that provide quality wages and safer conditions to be competitive in the bid process for public projects. These laws have also helped retain talent in the construction industry.

Tartaglione represents the 2nd Senatorial District, serving Philadelphia County.

State lawmakers on both sides of the aisle have touted the state’s prevailing wage as a tool to create high-paying, blue-collar jobs with good benefits. What positive impacts do prevailing wage requirements have for the state?

Frank Gamrat: Even though many groups support the repeal of the Davis-Bacon Act, there are other special-interest groups that are steadfast in their support of it. Davis-Bacon gives union contractors an advantage over non-union contractors in the bidding for government projects. Davis-Bacon not only dictates the wages that must be paid to workers on government contracts, but it also dictates the hourly price for “fringe” benefits. Fringes for union workers are programs that are paid from trusts that have been built from dues payments and are not subject to payroll taxation. However, for the non-union firm, the absence of such programs means that fringes must be paid directly to the employee as a supplement to the hourly wage and thus subject to payroll taxes. Therefore, not only are non-union firms required to meet the wage being paid by union firms, but they must exceed them through fringe payments – and then must pay more in payroll taxes than their union counterparts. As a result, many non-union contractors pass on government projects, further biasing upward the cost of construction.

Ryan Boyer: It provides very high-paying, family-sustaining jobs with benefits so that the state of Pennsylvania doesn’t, in effect, subsidize some big companies. When you don’t pay people, then they become a drain on the state’s coffers. The prevailing wage rate says: “Let’s pay these people what they deserve, what the prevailing wage in the area is, and give them benefits – medical and health benefits – so that they become self-sufficient and not a ward of the state.” I think that’s important. When you have a good job, you send your kids to college, you spend more – all the tertiary effects – they’re unquantifiable. When people make a decent wage, they can actually do some investments, spending. They can invest in their children. They can invest in college. We’ll just have a better citizenry.

Kristin Phillips-Hill: I think prevailing wage should be an option – and not a mandate – for public works projects. If the elected decision-makers believe the benefit outweighs the cost, that should be their decision. As a former school director, the last thing any school board official wants is an unfunded mandate. This legislation provides a resource to our local officials to address the significant budget constraints they are under and allows them to maximize the investment made by taxpayers to address the greater public need within their community.

Christine Tartaglione: The Prevailing Wage Act is crucial for protecting high-paying jobs across the commonwealth. It also helps indirectly by boosting the funds paid into the Unemployment Compensation Trust Fund. When times get tough, workers need a strong safety net behind them. Additionally, the health care benefits provided by prevailing wage jobs help reduce the number of individuals that apply for the state Medicaid system.

The DavisBacon Act requires contractors to pay a prevailing wage.

Critics of prevailing wage laws argue that they artificially inflate the cost of construction projects. What do you make of that claim?

Frank Gamrat: By their very existence, they are a mandated wage increase over what the market wage may be. But the real discrepancy happens when fringe benefits are added to the mix. Union contractors pay fringe benefits through programs that are run from trusts and are not subject to payroll taxation. However, for the nonunion firm, the absence of such programs means that fringes must be paid directly to the employee as a supplement to the hourly wage and thus subject to payroll taxes. When adding the cost of the fringe benefits to the hourly wage, the average payment that is to be made to a worker under the prevailing wage law is pushed even higher.

September 2021 City & State Pennsylvania Union contractors pay fringe benefits through programs that are run from trusts.

Ryan Boyer: I think that’s a specious argument and it doesn’t work, because obviously when you have a prevailing wage, you have to fill out surveys and it’s the wages most frequently paid. It makes a fair playing ground so everyone could play on a level playing field. No one is getting exploited, so it also protects the worker against unscrupulous bosses. It’s a very fair and transparent system – everyone knows what everyone gets paid for every job.

Kristin Phillips-Hill: We need to learn from the experience of other states that embarked on the reforms that I am supporting. For example, Ohio exempted school construction from its prevailing wage requirements. They found an aggregate savings of nearly $500 million, or 10.7%, over a five-year period. This translates into more public projects being completed at a cost that respects the taxpayers who pay for these projects.

Christine Tartaglione: Prevailing wage laws don’t artificially inflate costs of projects – they show the true cost of completing projects correctly the first time while ensuring workers receive fair wages, safer workplaces and quality benefits. When unscrupulous contractors lowball bids, they don’t represent the cost of doing good business in Pennsylvania. They show what it would cost to cut corners and not provide safe and quality jobs. Furthermore, the vast majority of studies done comparing the costs of prevailing wages from states that have eliminated their prevailing wage laws show that there are no statistical savings on the overall cost of construction. However, they do show lower wages, less insurance coverage, less retirement savings, and a significant reduction in investment toward apprenticeship programs. We must also remember that labor only makes up around 18 to 22% of the total cost of a project, while materials, fuel, equipment and engineering will make up a much larger share of the cost.

What impacts would a repeal of the state’s Prevailing Wage Act have on the state’s economy? What about workers?

Frank Gamrat: It would likely increase the number of jobs available and push wages upward without government intervention as firms compete for talent. We already see this competition result in higher wages as firms coming out of the pandemic have pushed wages up without that intervention. Furthermore, it would result in more construction projects being completed and more economic activity across the state.

Ryan Boyer: It would be horrible. You wouldn’t be able to get stuff done. Now is the absolute worst time as we face what people call the “Great Resignation” – I like to call it the “Great General Strike.” People have found that jobs that don’t pay good, family-sustaining, union wages and sectors like construction, like hospitality – it doesn’t even pay them to work because they’re not being paid adequate wages. So if you repeal the Prevailing Wage Act, you’ll have fewer workers, and the cost of construction will go up because workers aren’t working for sub-standard wages when they’re working on roads and bridges; they know how important it is to connect Pennsylvania together and keep our roads and highways safe. You want the best workforce to do that. Do you want a bridge put up with a worker that’s not getting paid his right rate? Just think about that.

Kristin Phillips-Hill: If you apply the Ohio changes to how we monitor school construction projects in Pennsylvania – the benefits for taxpayers and our public school system are incredible. For example, school districts here spent more than $7 billion in school construction and renovation projects between 2000 and 2010. If you apply the saving percentage realized in Ohio here, that would amount to an additional $700 million that could be refunded to the taxpayers, stave off school property tax hikes, or flow directly into the classrooms.

Christine Tartaglione: Repealing the Prevailing Wage Act would let the rich get richer and the poor get poorer. Bad actors would underbid projects, and in turn underpay workers, which would decimate the middle class. It would also destroy apprenticeship programs and cripple local workforce development initiatives. It would also put workers’ safety in jeopardy ... If we repeal the Prevailing Wage Act, fewer unionized contractors and employers would be able to win bids for projects, making worksites less safe. ■

Troubling The Waters

A new study finds that Pennsylvania could face over $1 billion in structural damage and related costs due to increased flooding in 2022 – more than any state except Florida.

By Harrison Cann

A study from First Street Foundation found that Pennsylvania is at high risk for structural damage from flooding, both from natural and manmade disasters.

FROM JOHNSTOWN to the remnants of Hurricane Ida, almost every town in the commonwealth has a flood story.

In 1972, the remnants of Hurricane Agnes battered the Harrisburg area, causing more than $13 billion in damage in 2022 dollars and forcing Gov. Milton Shapp to evacuate the governor’s mansion. Just a few years later, Johnstown experienced the third most devastating flood in its history, resulting in 84 deaths and damages totaling $2 billion in 2022 dollars. Then, in 2004, the remnants of Hurricane Ivan swept through central Pennsylvania causing more than $300 million in damages.

While officials at all levels of government have worked to improve flood prevention, mitigation and recovery efforts in the decades since these disasters, a troubling new report indicates that they may still not be ready for what’s to come.

A study conducted by the nonprofit research and technology group First Street Foundation analyzing the potential impact of increased flooding has found that the commonwealth trails only Florida for potential structural damage, and that three Pennsylvania cities are at serious risk of office, retail and residential damage.

The foundation’s 4th National Risk Assessment on Climbing Commercial Closures takes into account the potential structural damage, lost days of operation and downstream economic impacts based on current and future estimates of flood hazards. The analysis, which measured the flood risks and impacts in metropolitan areas, found that Pittsburgh, Philadelphia and Harrisburg will face significant damage-related losses, and that Pennsylvania as a whole will see the second-highest aggregate total structural damage costs of $1.22 billion among all states this year.

“As flooding severity and frequency changes along with a changing climate, increasing commercial flood risk understanding is especially important,” according to the study. “Understanding the flood risk to commercial markets is crucial to providing communities and policymakers the information needed to guide investment, mitigation and adaptation.”

In the Pittsburgh region, about 36% of all office, retail and multi-unit residential properties are at risk of flooding this year. The region’s total estimated damages amount to nearly $450 million – the third-highest in the nation. Philadelphia, with an estimated $208 million in damages, and Harrisburg, with an estimated $148 million in damages, rank 11th and 15th in the nation, respectively.

Richard Vilello, deputy secretary of community affairs and development at the Pennsylvania Department of Community and Economic Development, said flooding has become a growing issue across the commonwealth.

“This is getting more and more serious every year,” Vilello told City & State. “One of the things that we’ve seen is the trend to more isolated flooding events, larger storms kind of parking over an area … neighborhoods that have never been flooded before getting flooded.”

Disaster relief funds and flood insurance are critical for businesses and property owners to facilitate the cleanup and recovery from flooding. Relief funds typically come from the federal government through the Federal Emergency Management Agency. Depending on the size and impact of a storm or flood, emergency declarations can come from local officials, the governor or the federal government. Counties must meet individual thresholds based on population and the state must reach $19.6 million in damages to be eligible for federal disaster assistance.

Following the devastation from the remnants of Hurricane Ida last summer, particularly in the southeast, Gov. Tom Wolf called on FEMA to lower the threshold for federal aid.

“While my administration is working diligently to support recovery efforts, substantial gaps remain when these localized events do not meet federal damage assessment thresholds. As a result, victims are left to pick up the pieces with little to no financial support,” Wolf said in a statement at the time. “I’m requesting that FEMA adjust the thresholds to better reflect current weather trends that, as a result of climate change, are causing these intense rainstorms and impacting communities, including those that typically do not experience flooding.”

When asked what kind of response Wolf received, his office responded with the following: “We have not yet received a formal response from FEMA. However, Gov. Wolf continues to believe this is a necessary action to be considered as the frequency of these intense weather events increases as a result of climate change. We must be able to support Pennsylvanians impacted by this global crisis, which is why Gov. Wolf proposed a $10 million State Disaster Assistance Fund in his 2022-23 budget proposal.”

Ida is just the most recent example of Penn-

COMMONWEALTH MEDIA SERVICES

Experts say the issues related to water damage boil down to prevention, mitigation and recovery.

First Street Foundation Flood Map

The dots represent the model’s expectation of flood risk in a given area, with darker dots representing increasing depth, severity, and likelihood of flood.

sylvanians dealing with major flooding and water damage. What began as a Category 4 hurricane in Louisiana became Tropical Storm Ida by the time it made its way north and ultimately causing the Schuylkill River to crest just below its 17-foot record set in 1869, wreaking more than $100 million in public infrastructure damage.

Philadelphia-area businesses are getting more acclimated to dealing with flooding from natural and manmade disasters. A water main break in Center City Philadelphia in 2018 caused substantial damage to roads and businesses. It created about six inches of flooding and led to almost a year’s worth of repair work before several blocks of Sansom Street could be reopened. While the break stood out for its scope, such failures have become increasingly common: The city’s water department repaired 677 water main breaks in 2020 alone.

Jason Evenchik, owner of several Philadelphia restaurants, including Time and BAR on the 1300 block of Sansom Street that suffered significant damage from the break, said Time experienced about $275,000 worth of water damage. He said that although it took a month or two to reopen, the lack of foot traffic resulted in revenue being cut in half for about six months before returning to pre-flood numbers – just before the pandemic hit.

“I don’t know why [the city] is spending money on river projects when there are infrastructure issues to deal with,” Evenchik told City & State. “These projects are going forward, yet there’s major infrastructure that needs to be taken care of … that’s being ignored.”

The issues related to water damage boil down to prevention, mitigation and recovery. The City of Philadelphia assists business owners in connecting with disaster relief funds, and, in the case of Ida, coordinated with FEMA on cleanup and property damage assessments, Karen Guss, a spokesperson for the city’s Department of Licenses and Inspections, said in an email.

The federal infrastructure bill passed last year is expected to bring billions of dollars to the state to help address issues related to its crumbling infrastructure, storm and wastewater management systems and more.

With instances of flooding and severe storms expected to increase, government agencies must consider holistic approaches to not just react to floods, but be proactive in lessening the damage caused by them, Vilello said. Having also served four terms as the mayor of Lock Haven, Vilello said that the study and response efforts fall short of identifying the impacts in smaller communities around the state.

“There are 2,500 other municipalities where this is an issue. It’s a growing issue,” Vilello said. “We really need to look long-term on resiliency, mitigation and prevention.”

The three Pennsylvania metropolitan areas examined in the National Risk Assessment have flood implications that go beyond the city limits. According to the study, areas near Philadelphia, like Levittown and Chester, are expected to experience the most significant increases in structural damage and lost operational days due to flooding. In central Pennsylvania, Enola, Hershey and Shippensburg are expected to experience similar upticks, and near Pittsburgh, Tarentum and West View are among the areas most at risk.

One of the groups tasked with combating this growing problem is the State Planning Board, which is comprised of local and business officials, legislators and agency leaders. It works with the governor’s office and DCED to prepare a land use and

Water flooded the Schuylkill Expressway last summer after Hurricane Ida hit Philadelphia. Many roads were closed, leaving drivers immobilized and people stuck for days.

The new infrastructure bill is expected to bring billions of dollars to the state to help address these types of issues. Following the devastation from the remnants of Ida last year, Gov. Tom Wolf called on FEMA for more federal aid.

growth management report every five years. Vilello said now the board is finalizing development and zoning recommendations to best handle flooding issues.

“There are places in the world that have done a better job. I mean, there are places in Europe that have flooded for years and have had levee systems and have dealt with it,” Vilello said. “We’re going to have to deal with it with the Delaware River, the Ohio River Basin in Pittsburgh, the Susquehanna River. All of that is going to be affected. We have to look generationally, not just for next year; we have to look, 30, 40 and 50 years down the road.”

The proactive measures are necessary because the reactive policies are very limited, Vilello said. In many cases, flood insurance may cover structural damage but not any damage done to equipment or inventory, meaning it would come out of the pockets of business owners. Business interruption insurance could offer more coverage beyond just the property damage, but that can also be pricey.

“They’re pretty expensive policies with a pretty high deductible,” Vilello said. “That’s why we really lean on preventative measures and mitigation measures. Because after the fact, there’s not a lot of good coverage, there’s not a lot of good programs, and it’s a challenge getting up and running again for both businesses and communities.”

Evenchik joked that the loss of business following water damage was the “gift that kept giving.” While there are options to offer more relief grants or low-interest loans to businesses affected by flooding, loans aren’t helping the business owners in the long run.

“Low-interest loans basically kick the ball down the road,” Evenchik said. “We’re still incurring debt.” He said officials should consider offering need-based grants to businesses that are struggling.

The study recommends government officials utilize the vulnerability data to adapt their strategies, particularly weighing the difference in impacts among urban and rural communities. It states the indicators are “useful for governments to understand the risk as it relates to their local tax base and to plan accordingly ... Outside of these investment concerns, the results provided here can be used as inputs for areas which hope to develop more comprehensive risk models, especially as related to economic impacts.” ■

”This is getting more and more serious every year.”